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Climate change is impacting so much around us: heat, flooding, health, wildlife, housing, and more. WUSF, in collaboration with the Florida Climate Reporting Network, is bringing you stories on how climate change is affecting you.

Sea Rise Won't Sink All Of Florida's Real Estate Market, Experts Say. Just Parts Of It

flooded street
Flooding from an October King Tide in Miami Shores fills streets, sidewalks and driveways at its peak. Florida doesn’t have flood disclosure laws, so home sellers don’t have to tell buyers about previous flooding. ";s:

Florida’s first-ever — and short-lived — climate change czar set a clear priority for the state: Protect the real estate market.

Before she left for a White House job, Chief Resilience Officer Julia Nesheiwat drafted a report to Gov. Ron DeSantis about what steps Florida should take to deal with rising seas and temperatures by 2030. The January report, obtained by the Miami Herald via a public records request, is heavily weighted with what promised to be expensive investments — most of them designed to keep Florida’s most important industry high and dry.

Her blueprint includes steps already in the works like stricter building codes but also potentially controversial measures like disclosing flood risk to home buyers, home buyouts and vulnerability studies for cities and counties.

“Florida’s coastal communities and regions do not have time to waste and need a partner at the highest level to help manage and prepare against impending threats,” wrote Nesheiwat, who took a job with the Department of Homeland Security after six months in Florida. The governor hasn’t said if he’ll refill her position. The governor’s office did not respond to a call for comment on Nesheiwat’s report, which was first reported by the Tampa Bay Times.

A case study released Monday by the consulting firm McKinsey underlines the message of that unreleased Florida climate report — and contains dire projections for some swaths of the state, including the Florida Keys but also some surprising places outside of South Florida.

The case study found houses at risk of flooding could lose 5 to 15 percent of their value in the next decade and between 15 and 35 percent of their value by 2050.

That’s a conservative estimate, said case study co-author Mekala Krishnan, a senior fellow at the McKinsey Global Institute. It assumes people will realize that flood-prone properties are bad investments slowly and not abandon certain areas all at once, like if a hurricane hits or if something critical like a bridge or water treatment plant fails.

Despite that dire projection, Krishnan said the answer to the title of the report — “Will mortgages and markets stay afloat in Florida?” — is yes, provided the state actually does the sort of things suggested in Nesheiwat’s climate report.

“If we do I think the risk can be managed,” she said. But that doesn’t mean every pocket of the state will make it.

Chart shows where Florida’s real estate market could lose the most value to climate-change-driven flooding.
Credit McKinsey Global Institute
An analysis by First Street Foundation shows where Florida’s real estate market could lose the most value to climate-change-driven flooding.

The case study noted three counties in Florida at risk of losing property value the fastest — Dixie, Franklin and Monroe Counties.

By 2050, an analysis by the First Street Foundation shows Monroe County alone could see 35 percent of its properties flooded 50 or more times a year. That’s more than 12,000 homes flooded nearly every week. At that point, the study assumes, they would lose all their value.

Dixie and Franklin, in the Panhandle, were farther behind at 16 and 13 percent of their properties experiencing chronic flooding, respectively. Broward and Miami-Dade were much lower on the list, clocking in at 2.3 and 1.8 percent of their properties. Still, between Broward and Miami-Dade that would be almost 20,000 homes left worthless.

And unlike the closest historical parallel, a recession, property values won’t bounce back.

“There’s no reason to believe that if you wait 30 years it will get better. We know the direction,” said Spencer Glendon, a senior fellow at the Woods Hole Research Center. “This is the first time people have settled in a place knowing that their prospects geologically are bleak.”

And as floods and powerful hurricanes become more common, insurance premiums go up. Flood prone communities are due for a serious price hike next year when the National Flood Insurance Program, which holds more policies in Florida than anywhere else, recalculates its rates.

The McKinsey report found that if prices track with rising risk, average annual flood premiums could increase by about 50 percent from $800 to $1,200, with bigger jumps in higher-risk properties.

Costs like that make homeownership unreachable for some. They also restrict how much potential buyers can borrow from a bank, which drives home prices down further.

chart shows how much value Florida’s real estate market could lose to climate-change-driven flooding.
Credit McKinsey Global Institute
An analysis by First Street Foundation shows how much value Florida’s real estate market could lose to climate-change-driven flooding.

Once property values in a community start falling, the local governments that base an average of 30 percent of their budget on property taxes will struggle to cover costs. That’s a deadly combination, Glendon said.

“In finance, it’s called catch the falling knife,” he said. “Why would a new person step into that, when every year they’re going to be better informed about what is happening?”

Some initial studies have shown that buyers are starting to take the risk of climate change into account. A Harvard study of Miami-Dade County found single-family homeowners are increasingly turning to higher elevation properties. Another from the University of Colorado at Boulder found homes exposed to sea rise are selling for a 7 percent discount on average.

But as for now, that depreciation is peanuts compared to the explosive growth (and rising property values) the state is seeing.

Not only are more people moving to Florida every year, but those new people are also increasingly clustered on the most vulnerable part of the state — the coast.

While only 6.5 percent of the US population lives in Florida, the Sunshine State accounted for 11 percent of all building permits issued in 2018, the McKinsey study found.

“Developers respond to demand, and demand is still right at the water. When demand adjusts, developers will too,” said Sebastian Jaramillo, a real estate lawyer with Miami-based firm Wolfe Pincavage.

That fast pace of growth could also work in Florida’s favor, said Ron Ritter, a partner at McKinsey’s Miami office. As houses are torn down and rebuilt, there’s a new opportunity to build them back stronger or in better spots.

“There’s time for that to work out,” he said. “We’re not going to get anywhere if we’re not honest about the fact that there’s real risk.”

Honesty means making tough decisions now that benefit the state later. At the minimum, it means openly pointing out the state’s weak spots and strengths and investing appropriately at the state and local level. Even better if that data came from the state itself, Glendon said.

“They would radically reduce the probability of a financial crisis in Florida, because they would give investors on both sides better data,” he said.

This story was produced in partnership with the Florida Climate Reporting Network, a multi-newsroom initiative founded by the Miami Herald, the South Florida Sun Sentinel, The Palm Beach Post, the Orlando Sentinel, WLRN Public Media and the Tampa Bay Times.